TAIEX faces short-term downside risk: analysts

LOOKING AHEAD:One expert predicted more market-friendly policies would emerge ahead of the presidential election, leading to a stock market rally in the fourth quarter

By Amy Su / Staff Reporter

The nation’s stock market faces short-term downside risk in the midst of global uncertainties and the cautious outlook of high-tech heavyweights for the second half of the year, market analysts and fund managers said.

The benchmark TAIEX fell 1.4 percent, or 123.02 points, on Friday to close at 8,644.18 and fell 1.38 percent for the week, Taiwan Stock Exchange data showed.

Three major institutional investors sold a net NT$20.6 billion (US$710 million) in stocks last week, led by the NT$18.17 billion in net selling by foreign institutional investors, stock exchange data showed.

Ke Meng-cong (柯孟聰), a market analyst and vice president of SinoPac Securities Co (永豐金證券), said uncertainties over the global economy and the conservative outlook of major electronics firms as seen at the latest investors’ conferences were two main factors dragging down the stock market last week.

“The TAIEX may maintain its downward pace in the short term, as these two pieces of bad news have not yet been fully factored into the market yet,” Ke said by telephone yesterday.

A string of fires at Formosa Plastics Group’s (台塑集團) Mailiao (麥寮) petrochemical complex in Yunlin County, which could result in the shutdown of more of the firm’s plants, was the other negative news for the stock market this week, Ke added.

However, Ke remained bullish, expressing confidence that the TAIEX would rebound in the medium to long term and that the debt problems in the US and the euzozone would be resolved.

More market-friendly policies were likely to emerge ahead of the presidential election, leading to a stock market rally in the fourth quarter, he added.

“After this bearish news is gradually factored in, the rebounding electronics sector could help boost the TAIEX,” Ke said, adding that touch panel, solar energy and tablet-related stocks would play a leading role in any rally.

Eric Li (李俊毅), a fund manager at Allianz Global Investors Taiwan Ltd (德盛安聯投信), agreed with Ke’s view that the electronics sector would make a strong comeback at the end of this quarter.

“Although companies in traditional industries generally have stronger third-quarter performances than electronics firms, some of the sectors have already been overpriced,” Li said in a note on Friday.

Tang Jia-lung (唐嘉瀧), chief investment officer at JPMorgan Asset Management Taiwan (摩根富林明投信), said that the financial sector would gain most from the presidential election in January, especially with the government’s ongoing relaxation of cross-strait financial rules.